India's top private sector lenders ICICI Bank Ltd, HDFC Bank Ltd and Axis Bank Ltd said they were investigating allegations of widespread money laundering practices at their branches.
The shares of the banks fell briefly on Thursday after the independent investigative ,Aniruddha journalist Bahal, made the accusations in a news conference televised by a local TV station in the morning.
Bahal, founder and editor-in-chief of Indian news and opinion websiteCobrapost.com, said he had collected hundreds of hours of video recordings from "dozens and dozens" of bank branches across the country. He did not say when the recordings were compiled.
An article on the website posted on Thursday said an associate editor, using an alias and pretending to work for a fictitious politician who wanted to launder money, sought advice from bank officials on how to do it.
The article said branches across all the three banks suggested laundering methods that were "imaginative in their range and brazen in their approach."
In one case, Bahal said, a video excerpt on his website showed an HDFC Bank official explaining to an undercover reporter for Cobrapost.com different methods to launder money. It said Cobrapost.comoffered to hand over the videos to law enforcement officials or regulators. The article did not say if the recordings were eventually passed on to the authorities. Market regulator Securities and Exchange Board of India had no comment on the matter, according to a spokesman.
'Deeply concerned'
ICICI Bank told Reuters that it was "deeply concerned" about the accusations. In a statement, it said: "ICICI Group conducts its business with the highest level of compliance to legal and regulatory requirements. All employees of the Group are trained and required to adhere strictly to the Group Code of Conduct... We have demonstrated our commitment to this by following a zero tolerance policy towards any violation."
"We have constituted a high level inquiry committee to investigate into the matter and submit its findings in two weeks." HDFC Bank was investigating the matter on "top priority." "Any deviation is viewed very seriously and stringent action is taken both at an organizational and employee level," the bank said in a statement.
Axis Bank also said it would investigate.
"Axis Bank has systems and processes that are robust and fully compliant with extant regulations. We will examine whatever information that is brought to our notice and investigate thoroughly," the bank said in a statement.
Axis Bank shares rose 1.1% as after earlier dropping as much as 3.5%.
ICICI Bank shares gained 2.3% after earlier falling over 2%, while HDFC Bank was up 1.7%, also recovering from earlier declines.
The shares recovered after government data showed core inflation rose less than anticipated, reinforcing expectations that the central bank will deliver an interest rate cut next week to boost the economy.
Cobrapost Expose: HDFC Bank, ICICI, Axis Laundered Money
A Cobrapost pan-India undercover investigation has accused HDFC Bank , ICICI Bank and Axis Bank of running a vast, nation-wide money laundering racket.
Cobrapost, an online magazene, conducted a sting operation across various branches of private financial institutions recently. The magazene claimed that bank employees are readily accepting black money from customers to convert them into white money as a standard practice.
In a release sent to the media, Cobrapost alleged that these money laundering practices are part of a standard set of procedures within these banks.
1. These money laundering services are being openly offered to even walk-in customers who wish to launder their illicit money;
2. A variety of options for laundering ill-gotten cash are being offered brazenly;
3. These money laundering services are being offered practically as a standard product across the country.
How these banks launder black money
Cobrapost, an online magazene, conducted a sting operation across various branches of private financial institutions recently. The magazene claimed that bank employees are readily accepting black money from customers to convert them into white money as a standard practice.
In a release sent to the media, Cobrapost alleged that these money laundering practices are part of a standard set of procedures within these banks.
1. These money laundering services are being openly offered to even walk-in customers who wish to launder their illicit money;
2. A variety of options for laundering ill-gotten cash are being offered brazenly;
3. These money laundering services are being offered practically as a standard product across the country.
How these banks launder black money
* The ways these major banks suggested to transform the black money into white were both imaginative in their range and brazen in their approach. This brought to the fore a modus operandi that is tailored to rake in vast amounts of black money in the form of illegal deposits, insurance and investment products, sold by these banks. All these creative means make the dirty money squeaky clean without the regulatory authorities ever getting a whiff of what they are doing. Here is a gist of what the various bankers suggested to help the politician launder his illegitimate money:
* Accept huge amounts of cash and invest it in insurance products and gold.
* Open an account to route the cash into various investment schemes of the bank.
* Do it even without the mandatory PAN card or adhering to the KYC norms laid down by RBI.
* Split the money into tranches to get it into the banking system without being detected.
* Use “benami” accounts to facilitate the conversion of black money.
* Use accounts of other customers to channelize the black money into the system for a fee.
* Get demand drafts made for the client either from their own banks or from other banks to facilitate investment without it showing up in the client’s account.
* Keep the identity of the investor/depositor secret.
* Open multiple accounts and close them at will to facilitate the investment of black money.
* Invest black money in multiple instruments in the names of different individuals, not necessarily drawn from among the family.
* Allot lockers for the safekeeping of the illegitimate cash, including special large size lockers to accommodate crores of hard cash.
* Personally come to the residence of the client to take the black money deal forward and collect the cash, even bring along counting machine.
* Use provisions like Form 60 to deposit the illegitimate cash into the account to route it into investment.
* Help the client to transfer black money abroad through NRE (Non-Resident External)/NRO (Non-Resident Ordinary) account; transfer the money telegraphically or through means other than regular banking procedures.
Axis, ICICI Bank, HDFC Bank stocks fall on Cobrapost expose
Sting operation exposes money laundering activities undertaken by these banks
The stocks of Axis Bank, ICICI Bank and HDFC Bank fell in the morning trades following an expose by an online newspaper Cobrapost that these banks allegedly indulged in money laundering.
ICICI Bank stock was down by 1.38%, while HDFC Bank was down by 1.12%. Axis Bank was down by 1.74%. Cobrapost said the brazen criminal activity by these banks is channelizing vast amounts of black money into the regular banking system as laundered white money. "Our investigation, conducted across dozens and dozens of branches of these banks and their insurance affiliates, across all five zones of the country, revealed these shocking facts that these money laundering practices are part of a standard set of procedures within these banks," the web site editor, Anirudha Bahal said in a news conference in New Delhi.
When contacted a ICICI statement said: “ICICI Group conducts its business with the highest level of compliance to legal and regulatory requirements. All employees of the Group are trained and required to adhere strictly to the Group Code of Conduct, including AML and KYC norms. We have demonstrated our commitment to this by following a zero tolerance policy towards any violation. ICICI Group conducts its business with the highest level of compliance to legal and regulatory requirements."
The bank further said: "We want to assure our customers and all stakeholders that we are committed towards adherence to the high standards of business conduct, which is expected of us. We have constituted a high level inquiry committee to investigate into the matter and submit its findings in 2 weeks.”
Cobrapost alleged that these money laundering services are being openly offered to even walk-in customers who wish to launder their illicit money and a variety of options for laundering ill-gotten cash are being offered brazenly. The post said these these money laundering services are being offered practically as a standard product across the country. "This huge money-laundering racket being run by these banks has been captured by Cobrapost, on video-tape, running into hundreds of hours. The evidence is graphic, crystal-clear and clinching," the site said.
The investigation by Cobrapost finds the banks and their managements systematically and deliberately violating several provisions of the Income Tax Act, FEMA, RBI regulations, KYC norms, the Banking Act and Prevention of Money laundering Act (PMLA) with utter disregard to consequences, driven by their desire to boost cheap deposits and thereby increasing their profits.
ICICI Bank stock was down by 1.38%, while HDFC Bank was down by 1.12%. Axis Bank was down by 1.74%. Cobrapost said the brazen criminal activity by these banks is channelizing vast amounts of black money into the regular banking system as laundered white money. "Our investigation, conducted across dozens and dozens of branches of these banks and their insurance affiliates, across all five zones of the country, revealed these shocking facts that these money laundering practices are part of a standard set of procedures within these banks," the web site editor, Anirudha Bahal said in a news conference in New Delhi.
When contacted a ICICI statement said: “ICICI Group conducts its business with the highest level of compliance to legal and regulatory requirements. All employees of the Group are trained and required to adhere strictly to the Group Code of Conduct, including AML and KYC norms. We have demonstrated our commitment to this by following a zero tolerance policy towards any violation. ICICI Group conducts its business with the highest level of compliance to legal and regulatory requirements."
The bank further said: "We want to assure our customers and all stakeholders that we are committed towards adherence to the high standards of business conduct, which is expected of us. We have constituted a high level inquiry committee to investigate into the matter and submit its findings in 2 weeks.”
Cobrapost alleged that these money laundering services are being openly offered to even walk-in customers who wish to launder their illicit money and a variety of options for laundering ill-gotten cash are being offered brazenly. The post said these these money laundering services are being offered practically as a standard product across the country. "This huge money-laundering racket being run by these banks has been captured by Cobrapost, on video-tape, running into hundreds of hours. The evidence is graphic, crystal-clear and clinching," the site said.
The investigation by Cobrapost finds the banks and their managements systematically and deliberately violating several provisions of the Income Tax Act, FEMA, RBI regulations, KYC norms, the Banking Act and Prevention of Money laundering Act (PMLA) with utter disregard to consequences, driven by their desire to boost cheap deposits and thereby increasing their profits.
stick action has to be taken by RBI
ReplyDeleteI don't see anything new or shocking in the findings of the cobrapost, these are known facts. And I cannot see any landmark decree coming in any fore seeable future
ReplyDeletesuperb and awesome post, thanks for sharing
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